Irrespective of your business size, bookkeeping is an important operation that requires significant attention. Not only does it help you understand your financial health, but it also keeps track of your small business’s cash flow. Besides, there are tons of other advantages of bookkeeping for small businesses. For example, it helps you separate your business and personal finances, identify & prevent financial errors, streamlines your tax processes, among others.
Now, there are multiple ways of doing bookkeeping for your small business. The most common among these is to either hire an in-house bookkeeper or outsource your bookkeeping operations. However, being a small business owner, you can also do simple bookkeeping of your business. If you choose to do bookkeeping by yourself, here’s a complete guide to help you out.
Important Bookkeeping Terms You’d Know Before Starting Out | bookkeeping for my small business
If you’d search “how to do bookkeeping for my small business” online, you’d come across the following list of important terms. Let’s go through them first.
Accounts Payable (AP)
It’s the account that keeps the record of all the money you owe to the third party(s). These include suppliers, banks, governments, or anyone you borrowed money from.
Accounts Receivable (AR)
It’s the account that keeps the record of all money the third party(s) owe to you. In simple words, if you were to receive money from anyone, it’ll fall under the account receivable category.
Assets are those things owned by you to successfully steer your business. For example, cash, vehicles, electronics, buildings, and much more.
A balance sheet is the backbone of your business that presents you with your business’s financial condition. In simple words, it breaks down the assets, liabilities, and capital of your business for analysis.
Bookkeeping | Bookkeeping For My Small Business
Bookkeeping is the practice of recording your business’s day-to-day financial transactions and other documents, such as purchases, sales, receipts, and payments.
Capital signifies the total money or assets that personally belong to you. Additionally, it’s worth noting that “capital” doesn’t include the revenue or profit generated by your business.
It’s defined as the loss of value of your assets over some time due to a variety of reasons.
It’s the money you put into the company as the owner. Plus, it also includes all the accumulated profits.
Whatever money you spend to operate your business is called an expense. It’s not related to selling your services. For example, the money you spent to purchase laptops for your employees is an expense.
It’s the account that contains all the transaction data required to generate the income statement, balance sheet, and other financial reports.
A journal is a place where the bookkeeper stores all the transaction details for easy & quick access as and when required.
Payroll is the process of compensating your employees for a set period or on a given date. It’s the biggest component of a bookkeeper’s duty.
It’s the money you make through selling your services. Your business revenue also includes the money you get by selling the assets your business doesn’t need any longer.
It’s a bookkeeping worksheet. In a trial balance sheet, the balance of all ledgers is collected into debit and credit account column totals that are equal.
When you’re starting with bookkeeping, you should have a clear understanding of the above terms.
As your next step, below are some useful tips to properly execute your small business’s bookkeeping operations.
Expert Tips To Execute Your Small Business’s Bookkeeping Operations
I bet the following expert bookkeeping tips will transform your small business into a moneymaker and answer your query, “how to do bookkeeping for my small business”.
- Always create a new business account to keep your finances and your business dealings separate. Thus, at the time of bookkeeping, you’ll know where to look for the required financial information.
- It’s recommended to budget for tax separately to avoid paying a big chunk at once. For example, you can set aside a
- small portion of your income in a savings account or something similar. Then, use this saved money to pay off your tax as and when the taxman knocks on your door.
- Always keep your records organised for easy access in the future.
- You should track all your business expenses, irrespective of their magnitude. For example, track the money spent on office upgrades, equipment upgrades, and so on.
- Use any cloud-based bookkeeping software like Xero, QuickBooks, or MYOB to maintain your daily records.
- Mind your account receivables. Keep eagle’s eye on your receivables as it can affect your cash flow.
- Don’t miss your tax due dates. Not filing your tax returns on time not only invites tax penalties, but also worsens your taxation process.
- Last but not least, go digital! The Australian Taxation Office (ATO) lets you do the majority of your tax reporting and transactions online through their digital services.
Hence, these are the top expert tips to assist you in your small business’s bookkeeping.
The Final Verdict
Bookkeeping is an essential component of your business that keeps you on top of your financial game. Though you can carry out bookkeeping for your small business by yourself, it’s not a good idea for a fast-growing business.
We provide a multitude of Xero bookkeeping and accounting services to empower your business, such as data entry, account receivable & payable, account management, and much more.
Contact us today to book your free trial. You focus on the work that matters to you, and we’ll take care of the rest!
Let’s connect on +61 451320102